Loan Interest Rates

[FundeK]

Does anyone know the proper correction for a plan which has charged an incorrect interest rate on participant loans?

Hypothetical situation: Plan's loan program indicates a "reasonable rate of interest". Plan intended to charge prime +2, but recordkeeper's sytem mistakenly "froze" the interest rate in for a period of time 2005 (no interest rate updates were made when prime changed). In 2006, a system update was made which caused future interest rate changes to be made to the plan, but the "base" interest rate was now off the mark because of the time it was "frozen". (system calculates new interest rates by looking at the old one on the system and adding or subtracting the rate increase or decrease). So if prime went up by .25%, the interest rate for the plan also went up, but it never caught up to prime +2%.

So, the plan charged an interest rate that was below what it intended, and at times below prime. Does a correction need to be made?

Also, prior to 2005, all loans issued were prime +2%.

[Guest Bart]

In accordance with EPCRS, have the company pay the interest resulting from the failure.

[FundeK]

Does the interest get credited to the affected participant accounts and posted as interest? Is this a self correction that does not need reported? Thanks!